The graduated tax credit offered buyers of electric and plug-in hybrid vehicles acquired after December 31, 2009 up to $7,500. The minimum credit was $2,500. Consumers were not eligible once their automaker reached a limit of 200,000 vehicles. Under the old system, those who bought electric vehicles like the Volkswagen ID.4 would receive $7,500 while customers buying plug-in hybrids received less.
The new credit will continue to offer $7,500 for electric vehicles, but with some important new caveats. Vehicles must now be assembled in the United States. There are also new requirements that battery metals must be mined or processed in the country or in a country that has a free trade agreement with the United States.
Biden described the legislation as a way to meet climate goals by reducing emissions and accelerating the adoption of clean energy. But 70% of electric, hybrid and fuel cell vehicles available for purchase in the United States are now eligible for no credit, including partial credit, and none will be eligible for full credit, according to the Alliance for Automotive Innovation. , which represents automakers like Ford. , GM, Hyundai, Toyota and Volkswagen.
The new credit, however, lifts the existing cap of 200,000 units on the number of vehicles that can be eligible from each automaker. Tesla vehicles have not been eligible since late 2019, when the company reached its 200,000th vehicle sale and GM reached the limit in April 2020. Newer EV makers, like Rivian and Kia, were still offering customers the $7,500 credit.
“It unfortunately ruins it for a lot of people,” California resident Jeff Neubauer, who rushed to finalize an order for a Lucid electric vehicle before the law took effect, told CNN Business in hopes of to receive the credit, about the new restrictions. “Anyone who buys a car lives in a completely different world.”
“The least risky and most profitable bet I’ve ever made”
Neubauer originally booked a Lucid Air in January to serve as a shared vehicle with his wife. He received an email from Lucid last week warning him that when the Cut Inflation Act is enacted, the Air will no longer be eligible for the $7,500 tax credit. But the bill included a transitional rule that would allow vehicles to qualify under the old rules, provided a buyer had “entered into a binding written contract to purchase” an electric vehicle before Biden signed the legislation.
“We have decided to help reservation holders take advantage of the transition rule by opening a window to place an order for their Lucid Air,” Lucid wrote in an email seen by CNN Business. “We are doing this to help those who want to do everything possible to maintain their federal tax credit eligibility.”
He also warned that a buyer’s deposit of $300 or $1,000 – depending on the trim line he chose – would become non-refundable.
Neubauer said he never even tested the Lucid Air. But he called signing the deal and the risk of losing his deposit a “no-brainer”. Neubauer said he owns several electric vehicles and is comfortable with them.
“If my wife doesn’t like it for some reason when it comes out, I lose $300,” Neubauer said.
Oregon resident Jase Daggett had a similar reaction after hearing Rivian talk about the new tax credit.
“Signing the contract will render $100 of your existing $1,000 deposit non-refundable and help you maintain your eligibility to claim the $7,500 tax credit,” Rivian wrote in an email sent Wednesday. “Once the Inflation Reduction Act comes into force, customers will lose this chance and be subject to the new restrictions.”
Daggett never tested the Rivian R1T pickup, relying instead on word of mouth and YouTube reviews. He said he signed the contract “about four minutes” after receiving the email.
“Least risky, highest paying bet I’ve ever made,” Daggett told CNN Business.
Other buyers have been reluctant to sign, especially before a test drive. Jeff Douglass said he received two emails from Lucid about finalizing his reservation so he could potentially qualify for the tax credit.
“I told them every time they asked me anything, ‘I want a test drive, or I don’t want to hear anything else,'” Douglass said.
A push towards more domestic supply, with new unknowns
Manchin worried about the United States’ reliance on foreign countries for electric vehicle components. China is dominant in electric vehicle metal processing and battery manufacturing.
“I don’t think we should build a mode of transport on the back of foreign supply chains,” Manchin said recently. “I won’t.”
The bill requires that by 2023, 40% of the critical minerals in an electric vehicle battery be mined or processed in the United States or in a country where the United States has a free trade agreement. This 40% will gradually increase to 80% in 2027. Regulations will have to be created to determine precisely how a vehicle meets the thresholds.
Utah resident Devin Hathcock, who pre-ordered an electric Nissan Ariya in November 2021, said he was worried he’d miss the credits when he first heard about the fuel reduction law. inflation.
“If they’re really trying to get people to adopt electric vehicles, that was really the wrong way to go,” Hathcock told CNN Business.
When Nissan emailed him offering to sign a binding contract in hopes of still receiving the credit, he signed immediately.
“I felt like I had nothing to lose,” he said. “And everything to gain.”